Written by
Nick Blenkey
Conrad Industries, Inc., a shipbuilder based out of Morgan City, La., has released its first quarter 2022 results.
The net loss was $116,000 in the quarter, compared to $705,000 in net income in the first quarter 2021. Net income included $2.9million in other income from the Employee Retention Credit.
Conrad’s backlog stood at $136.5 million as of March 31, 2022, compared to $148.5 millions at December 31, 2021, and $193.4 Million at March 31, 2021.
Tight LABOR SUPPLY AND HIGH STEEL PRICES
Conrad noted in its full filing on www.otcmarkets.com the continued challenging operating environment. It includes continued high steel prices, inflationary increases in other materials, disruptions in supply chains and tight labor markets that have led to difficulties in hiring and retaining direct labor.
We responded by significantly increasing our hourly labor rates in February 2022.
We continue to see a soft market in new construction, especially for energy transportation projects and projects that are related to the offshore oil & gas industry. However, demand in infrastructure and government markets helped to offset some of the negative impact. We believe that many new construction customers are putting off new orders due to the pandemic, rising steel prices, and other factors. The market for repair continues to be affected by the depressed Gulf of Mexico market activity and uncertainty in markets. However, the positive impact of profitable jobs in infrastructure market helped offset some of these negative effects. Both segments continue to face pricing pressure, which has increased due to the pandemic as well as high steel prices. These factors adversely impacted our results in 2021 and could continue to have a negative impact on our financial performance through 2022.
Steel prices rose sharply between late 2020 and 2021, mainly because of supply issues caused by the COVID-19 Pandemic. Steel prices rose despite the fact that they were starting to ease in 2022. However, steel prices rose after the Russian invasion of Ukraine on February 24, 2022. There is much uncertainty regarding the future availability of steel prices and prices, due to supply issues resulting from the COVID-19 Pandemic, relatively low inventories, and the war with Ukraine.
POSITIONED FOR OPORTUNITIES
Conrad believes it is well-positioned for taking advantage of market opportunities that improve. We believe customers have delayed their orders due to high steel prices, pandemic uncertainties, and some of these orders may move forward when steel prices drop or our customers fleet replacement needs or business opportunities require the vessels.
We have seen a continued strong market for dredging and other infrastructure-related vessels, which we expect may continue, supported by the Infrastructure Investment and Jobs Act enacted in 2021, says the company. We are also interested in projects in the offshore renewables industry, particularly as it moves into Gulf of Mexico. We are also optimistic about the opportunities in our repair-and-conversions segment.
NAVY ORDER
The company notes that the U.S. Navy awarded it a contract in March 2022 for the design and construction a Yard, Repair, Berthing and Messing(YRBM) barge. There are options for seven more barges.
Conrad claims that the fixed-price contract, a small-business set-aside, could have a potential value exceeding $140million if all options are taken by the U.S Navy. The company expects to deliver its first YRBM barge in the U.S Navy’s late 2023.
If the Navy exercises all options to purchase additional barges, peak production will occur between 2023 and 2025.
